LONDON (Reuters) – Barclays suggested on Tuesday it would undertake significant cost cuts later this year due to margin pressures and despite third-quarter pre-tax profit slightly above expectations.
On the London Stock Exchange, Barclays shares fell 7.28% at 08:24 GMT.
Faced with prospects of falling interest margins, particularly in Britain, Barclays said it was “evaluating significant structural cost actions” to help improve yields, which could lead to significant charges as early as the fourth quarter of this year.
The British lender posted a pre-tax profit of 1.9 billion pounds (2.18 billion euros) for the period, compared to 2 billion pounds the previous year. An analyst consensus forecast a profit of 1.77 billion pounds.
This slight drop highlights the pressure on Barclays’ margins, linked to competition for savers. This was offset by good performance in its credit and consumer card businesses.
“These results are likely to further lower market expectations for UK banks, and we see a negative reading for Lloyds and Natwest,” JPMorgan banking analysts said in a note.
Furthermore, the bank lowered its net interest margin forecasts. She now estimates it between 3.05% and 3.1%, compared to around 3.15 previously. The cause is political pressure to help savers and stagnant inflation reducing loan profits, Barclays explains.
The lender set aside a further £433m in the quarter for potentially bad loans, citing tougher updated economic forecasts and rising delinquencies in its US credit cards unit to pre-pandemic levels .
Barclays reported a 6% drop in revenue at its investment bank for the quarter, a division already in decline in the first half.
Revenue at its traditionally strong fixed income, currencies and commodities division fell 13% as lower market volatility dampened client enthusiasm for trading.
(Reporting Lawrence White and Iain Withers, French version Gaëlle Sheehan, edited by Blandine Hénault and Kate Entringer)
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